Revitalizing the Alliance

...But it should help to make clear that if the Alliance is to be made effective, it must become more liberal in the classical sense...

...The basic truths about the U.S...

...One reason is that their administrative facilities are not equipped to handle modern social problems...

...The element of truth is that the more an exporter produces the less he gets for his merchandise...

...Ostensibly, the program is a deliberate attempt to reach the masses over the heads of their governments—the oligarchs, the landholders, and the politicos...

...When they try, it usually leads to trouble or embarrassment...

...To qualify for aid under the Alliance a country was supposed to agree to legislate steeper progressive income taxes...

...A case in point was the election of Juan Bosch to the Presidency of the Dominican Republic...

...All this is not to say that dictatorships, either of the Left or Right, are the panacea for Latin American instability...

...Consequently, they are unable to give good service, let alone expand to serve growing economies...

...and when it is time for him to receive the benefits, either his money has been eroded to nothing by inflation, or the benefit is simply not available...

...The end result would have been to undermine relations between Santo Domingo and Washington, and at best Bosch's government would have been in a state of permanent insurrection on the model of that now carried on by the terrorist groups in Venezuela...

...Rather, the point is that inflexible adherence to the principles of representative democracy is neither an essential condition for keeping the Communists out of Latin America nor sufficient for fostering economic development...

...press when it explores the defects of our own society, for then the positive aspects of American life seem all the more credible...

...Since newspapers in Brazil cost three cents each, one could not escape the suspicion that the Embassy was lying or had gone into the used paper business...

...But the over-all picture is a sad one indeed...

...An ambassador's hands should not be tied because at some place, at some time, some fool might misappropriate funds or spend them in a manner inimical to U.S...

...Their statisticians take as their base the high prices from the Korean War period, then go on to show that if these high prices had been maintained Latin America would have double the foreign exchange income it has today and would not need aid...

...Surely, there can be no objection to interference on the businessman's behalf when this does not conflict with more important political objectives...

...Experience has shown that most such projects survive a succession of administrations...

...A typical example of this evolutionary process in U.S...

...The laws are passed...

...economy and lie about in depreciating currencies, steadily eroding away to nothing in central banks...

...Though liberalism is oldfashioned, a continent that in many ways is still stranded in the 19th century can best assimilate the remedies appropriate to that period...

...United States public utility firms all over Latin America are victims of a very difficult situation, having obligated themselves to furnish services at fixed prices computed in currencies which have lost their value...

...The tax question is a good illustration...

...viewpoint...

...Bosch is certainly no Communist, but his alienation of the previous ruling group would in time have forced him into an alliance with some of the less stable Leftist groups and possibly even with the Communists...

...It was to be aid with a new twist, or "social" rather than capital investment...

...Only confidence can keep money usefully employed in these countries, and only policestate methods can hold on to it if this confidence is lacking...

...Most Latin American social security laws, incidentally, also fall under the heading of illusory legislation...

...it is illusory because the loans are eternally renewed...

...One of the items listed was nearly $1 million for "subscriptions to periodicals, etc...

...The best propaganda is supplied by the U.S...

...Meanwhile, they must continue to import goods at prices dictated by semi-monopolistic and oligopolistic manufacturers...

...And where Latin America is concerned, hardly any countries are sufficiently important as producers to control prices through reducing production...

...Second, social-minded, progressive, forward-looking democrats and Socialists would be brought to power and eliminate the Communists from the Latin American scene...

...2. Tax Incentives...

...While few people seem to be aware of it, there is no land shortage in Latin America, nor is the lack of land the reason for rural poverty...

...On this score, the Communists have pressed the argument that foreign aid from capitalists is nothing more than a loan to the recipient country of what was stolen from it by paying low prices for its exports...

...7. Lend less and give more...

...The following, for example, would go a long way toward revitalizing the Alliance: 1. Replace long-term planning with a project-to-project approach...

...Often the same plans, deftly disguised, allow more flexibility to ward off opponents...

...I think that what is required, therefore, is a revision of U.S...

...Although the Alliance seeks to remedy the problems of primarily agricultural economies, these problems will become increasingly less important as industrialization proceeds to change the economic structure of the countries involved...

...To begin with, much of this sort of legislation is double-edged, what the Brazilians call contra-producente...

...that, in fact, their protection is the government's primary function...

...6. Public Law 480: counterpart funds...

...When the Alliance was first begun, the United States expected to be dealing with rational partners eager for a joint approach to solving economic and social problems...

...Laws that are supposed to check capital outflow frequently have an opposite effect...

...The case that comes most glaringly to mind is Peru...

...The Alliance for Progress favors more progressive taxation...

...In an economy as tax-oriented as ours, though, little will come of this good advice until meaningful tax privileges are granted...

...If it were only a question of money this would not matter, since the sums involved are not huge...

...Ambassadors, after all, are not supposed to govern the countries to which they are accredited...

...Some Latin American governments may wish to undertake such a step on their own initiative, and in several instances it has worked out well...

...economy, political systems and way of life are adequately covered by the wire services, magazines, and other unofficial communications media that do not provoke negative reactions...

...Industrial investment induced by tax incentives would also outflank most of the problems the Alliance wants to solve, and has attempted to solve, by legislative fiat...

...It must be said in all fairness, however, that the failure was not predictable and the experiment was a reasonable and statesmanlike risk...

...In countries where a free and adequate press exists, official U.S...

...A good many American businessmen still refuse to recognize this...

...The American taxpayer would be better served if ambassadors had them available for discretionary disbursements that are in our interest...

...But where long-range plans are lacking the U.S...

...Ambassadors should be given use of a larger part of these funds and should be allowed to use them at their own discretion...

...8. Cut down propaganda activities...

...Yet doing so is one of the basic procedures of the Alliance...

...foreign policy is bound to be adversely affected...

...The authors of the Alliance apparently reached the facile conclusion that an undemocratic oligarchy selfishly clinging to its priviliges was responsible for the Hemisphere's problems...

...government are on the scene only to protect them...

...Even were this not resented, it leaves the recipient government open to accusations of tutelage...

...Many recipient countries would be better served by outright grants, and the donor would be no worse off...

...But if they are cajoled into doing so by the United States and the reform proves detrimental, the blame will redound to Washington...

...Individual projects, on the other hand, do not suffer from the same weaknesses...

...they would depose the Bishop of Rome, let alone redistribute land, if they thought it electorally profitable...

...The trouble is that those who are the targets of propaganda are more likely to become skeptical of the truth than convinced of it...

...Regional self-interest as well as momentum see them through to a conclusion even under the most difficult circumstances...

...Moreover, the politicians elected would compact with the Devil to insure re-election...

...The danger of going too far too fast can, after all, exceed that of standing still...

...Herbert Cahn, a new contributor to these pages, is a former Rhodes scholar now living in Latin America...

...But to the State Department's dismay, the law actually penalized those who had brought capital into the country and scared new investors away...

...Instead of launching progressive programs, Washington had to spend a good deal of time apologetically explaining that it was not trying to re-colonize the Hemisphere...

...It is simply impolitic to coerce countries into passing legislation favored by our own Agency for International Development...

...The commercial interests of U.S...

...When correct figures are used the argument is shown to be largely nonsense, but something could, and should, be done about its element of truth...

...but when it does, private commercial questions rightly become secondary...

...Another area in which imposed legislation can backfire is land reform...

...The thinking behind these prerequisites for Alliance aid seems to have been twofold...

...propaganda programs could be canceled at no loss, and in many cases at a profit...

...The Peruvian Army did not want Victor Haya de la Torre in power, and cancelled the country's elections...

...Failure because of incompetent administration can only lead to revolutionary dictatorships, either Communist or Fascist...

...Furthermore, much imposed legislation merely creates the illusion of solving problems...

...American consulates and embassies are beginning to look ridiculous in their propaganda...

...Where this is not the case, more often than not land reform only succeeds in making starving peasants out of starving peons, and at the same time breaks up the social organization of a society built on an agricultural middle or upper class...

...4. Primary export product prices...

...3. Stop interfering in internal politics...

...Fast tax write-offs on investments in underdeveloped countries go a long way toward encouraging their acceptance...

...aid is tied to long-term projects which for one reason or another are abandoned, U.S...

...And in Brazil another man who had been relied upon, Janio Quadros, suddenly resigned the Presidency and gave way to Joao Goulart, a man of consummate political skills yet devoid of even an elementary sense of public administration...

...5. Don't mix foreign policy with commercial interests...

...But before long the reasonable and moderate Arturo Frondizi was deposed in Argentina, leaving the country at the mercy of rival military cliques that threatened civil war on the issue of the extent to which—not whether—the Peronistas should be suppressed...

...True, land may be inequitably distributed, but reform makes sense only when access to the land is barred by unproductive hereditary land ownership...

...No one seems ever to have asked how progressive...

...American businessmen abroad, however, have a tendency to think that representatives of the U.S...

...In addition, it is much easier to control expenditure, performance and even venality when supervising individual projects without stepping on nationalist toes...

...the deductions are made from the workers' payroll...

...But it is impractical to exhort other governments to pass new legislation to accommodate a U.S...

...The utility firms then turn to Congress or to the State Department for assistance, hoping to get the most out of properties that are rapidly becoming worthless...

...pass anti-capital flight laws, and adopt other measures aimed at straightening out the selfish ruling classes...

...FOR A NEW POLICY IN LATIN AMERICA Revitalizing the Alliance By Herbert Cahn BY now, even among some of its staunchest advocates, there is general agreement that the Alliance for Progress has thus far been a failure...

...they simply have become less important as industry has moved in...

...Ambassador made some public statements obviously designed to snatch the carpet from under the Generals' feet, they forced his withdrawal...

...history is the agricultural poverty of the South...

...Finally, although the U.S...

...In reply, the Embassy published a breakdown of the application of its wheat funds...

...interests...

...intensify land reform, which generally means expropriating the property of the large holders...

...firms do not necessarily coincide with the foreign policy interests of the U.S...

...After the U.S...

...Had they given this more thought, they might have taken into account that the governments of Brazil, Argentina, Uruguay, Chile, Venezuela and Colombia had been elected by irreproachable democratic processes...

...But in poor countries reforms to soak the rich can often result in the redistribution of poverty, and not in the creation of new wealth...

...Most of Latin America's social problems are extensive and general, rather than particular, and social reforms raise popular expectations long before they raise the standard of living...

...If the United States government feels that it must withhold financial cooperation from a foreign government, it is its privilege as well as its duty to use its best judgement in each case...

...In this way, the investor would be encouraged to re-invest his profits without straining the balance of payments of the recipient country by returning large profits or royalties to his home office...

...There are always certain specific areas—now in one place, now in another—where thanks to the talents of some outstanding individual administration is excellent...

...In time, these very remedies will propel Latin America into the 20th century...

...One of the certain signs of underdevelopment is excessive dependence on the exportation of one or a few non-manufactured products...

...At the same time, such reforms tend to discourage those who have created wealth in the past from continuing to do so...

...Yet that should be the first question if the issue is to be handled on factual rather than moralistic grounds...

...Brazil, like all the signatories of the Alliance, was urged to pass such a law, and did...

...government, and sometimes they obviously clash...

...Where the latter obtains, they must be threatened with serious consequences if they use their financial strength to force political interference that may undermine the stability of the governments in the countries where they operate...

...Principally, Congress should insist that minimum restrictions be placed on these counterpart funds by the recipients of agricultural products...

...Master schemes tend to make governments rigid, and they also provide a broad base for attacks from the opposition...

...The availability of free funds can give ambassadors a greater ability to encourage policy decisions congenial to the United States...

...Benefits were to accrue directly to the downtrodden in a manner that would prevent their being stolen by the rich for accumulation in numbered Swiss bank accounts...

...It is worth adding that such legislation would find much less opposition in Congress than is usually accorded foreign aid...

...Almost from the very start, therefore, instead of meeting a desire for cooperation the United States faced aggressive xenophobia...

...By contrast, supervision of a long-term plan invariably involves the State Department's interference in the internal affairs of another country...

...In many instances, the governments in power were aware of the risks involved as well as of the danger inherent in abrupt shifts of power...

...As their equipment becomes obsolete, their services deteriorate and they become an embarrassment even to the most well-meaning local government...

...At the same time, the investor could be required to reimburse his original tax credit as soon as he begins to remit profits home, so that the first remittances will be applied to amortization of the tax credit...

...involvement in the internal affairs of other countries being foolish...

...Another important reason for the Alliance's failure is a basic contradiction in its conception...

...First, the people would be shown that the Communists are lying when they say that the United States is the natural ally of the exploiting plutocracy...

...should not demand them...

...As it is, these counterpart funds are already lost to the U.S...

...Whenever prices have skyrocketed, Washington has tried to make such agreements...

...policy toward Latin America in general and of the Affiance for Progress in particular...

...There are situations where they may be helped, and others where it would be best to tell them to pull their own chestnuts out of the fire...

...Recently, the American Embassy in Rio was accused of using wheat counterpart funds to finance the election of anti-Communist deputies to the Brazilian Congress...

...This is a typical instance of U.S...

...But the right time to make them is when prices are low and the other contracting parties are likely to agree to reasonable conditions...

...Before a strong protest from New York bankers halted the practice, the Kennedy Administration cooperated in this matter by going to the absurd length of threatening physical searches of airline passengers from Brazil to see if they carried correspondence containing flight funds...

...For one thing, most Latin American governments are better equipped to collect direct rather than indirect taxes, so that higher rates on indirect taxes merely serves to punish the honest...

...They made bad commercial deals...

...What is more, if U.S...

...produces the most automobiles in the world, it has no more experience in developing underdeveloped countries than do the recipients of aid, and should look upon its own efforts in this field with some humility...

...For another, progressive taxation in areas of capital shortage is a very doubtful policy, for it transfers income from investors to consumers, or from a more efficient sector of the economy to the least efficient: the government...

...If a government prefers the longterm approach to economic development, it should not be discouraged...

...The United States government has been very generous with exhortations to invest in Latin America...

...Much of the lending done under foreign aid today is illusory...

...This list of suggestions is hardly exhaustive...

...As noted earlier, such reforms tend first of all to decrease production...

...Why, then, haven't they...

...No cure has ever been found for the South's agricultural ills...

...The United States, therefore, should encourage and participate in more world marketing agreements on commodities...